Does tech equal trust? Yes! According to the 2024 BDO Audit Innovation Survey.
"63% of senior finance leaders say trust is somewhat or significantly enhanced for them and their key stakeholders when auditors use advanced technology, and 64% say they look for a firm to use AI before even engaging with an auditor," reports BDO.
Artificial intelligence is rapidly expanding its reach into different industries and roles. And now, lease accounting teams and their auditors have entered the chat.
As technology advances, its integration into auditing processes is advancing. The survey along with the AICPA (American Institute of Certified Public Accountants) updates show a change in how we use technology. The focus on AI is growing daily. This change aims to improve audit quality, transparency and efficiency.
However, the data also reveals a balanced perspective among finance leaders. While technology can optimize and innovate the audit process, the expertise and judgment of seasoned accounting departments remain indispensable.
More than half of finance leaders (54%) believe that utilizing advanced technologies, like AI, will improve audit quality and financial reporting. Additionally, 64% of respondents now seek audit firms that already use AI, viewing it as a competitive advantage in lease management.
The benefits of integrating technology into audits are substantial. Leaders cite greater process efficiency (52%) and enhanced transparency (46%) as some of the top anticipated benefits.
The AICPA recently approved updates to its peer review standards. This signals an industry-wide acknowledgment of the importance of technological alignment and rigor in audit practices. These updates, along with new resources for quality management, give firms clear guidelines. They can use technology to improve audit and financial statement quality.
Despite the technological transformation, finance leaders remain steadfast in their demand for experienced auditors. The survey shows that 56% of people prioritize a proven track record when choosing an audit firm.
Additionally, 49% value an auditor’s knowledge of their specific industry when managing accounts. Skilled professionals are essential for understanding and using the results from advanced tools. This is key to keeping audit quality and trust.
Technology enhances the audit process, but seasoned auditors provide the contextual understanding that makes data-driven insights valuable. With their expertise, they can interpret AI insights accurately. And, most importantly, these auditors ensure that nuanced industry details are not missed in an automated process.
A strong data foundation is critical for successful technology adoption in audits, but establishing data governance remains a challenge. In the BDO survey, 69% of finance leaders said data governance is a significant obstacle to a smooth audit. Other challenges include resource constraints (60%) and the difficulties of compiling and preparing audit evidence (56%).
These challenges highlight the need for proper data management protocols before adopting complex technologies. If you don't have a strong data foundation, new tools may not work effectively. This includes ETL software, robotic process automation, and augmented reality.
Good data governance can unlock the full potential of these tools. It improves transparency and builds trust between finance teams and auditors while ensuring compliance.
The accounting talent shortage is an ongoing challenge, and AI is proving to be a valuable tool to address this gap in real time. Nearly 61% of finance leaders are turning to AI to address inefficiencies.
AI tools in data entry, predictive analytics and expense management help finance professionals focus on important tasks. This lets them use their skills for strategic work and informed decision making rather than busy work dominating their day to day.
By implementing AI in these ways, finance teams can alleviate the strain caused by the talent shortage. They can now ensure that critical auditing functions are maintained even as the demand for experienced professionals continues to outstrip supply.
As the auditing landscape evolves, finance leaders and audit firms alike are re-evaluating their priorities and strategies. The new peer review standards from AICPA and advances in AI will improve the audit profession. These changes will enhance quality, transparency and trust while maintaining compliance with ASC 842 and IFRS 16.
However, the human element remains critical. Technology may revolutionize the way auditors conduct their work. But the expertise, judgment and industry knowledge of experienced auditors will continue to be essential.
When accounting teams are preparing for audit, there are a lot of steps. They must produce lease accounting disclosure, roll-forward, reconciliation and ad hoc reports in response to audit requests.
Instead of taking minutes or hours, CoStar Real Estate Manager provides everything with just one click. They also include all the lease-level details that auditors need. This helps ensure the total amounts in reports are accurate.
Companies that can effectively blend the power of advanced technologies with skilled audit professionals will likely stand out. They will set the standard for an auditing process that is as thorough and insightful as it is efficient. By focusing on alignment, trust and data maturity, finance leaders and auditors can enjoy the best of both worlds. This is how they'll meet the needs of a modern, dynamic business environment.